Methods and systems for promoting usage of credit card accounts are well known. Such methods and systems are generally designed to reward a credit card holder for exhibiting behavior preferred by a credit card issuer. Credit card reward programs typically fall into one of three categories: reward accrual programs, tiered reward programs and specialty programs.
Reward accrual programs promote usage of a credit card account by rewarding a card holder for account usage with either rebates or redeemable program points. In such programs, account usage is typically measured as a function of either total charge volume or total revolving credit. Generally, card holder performance is measured monthly, and rewards are distributed based on the monthly measurements.
A frequent flyer mile reward program is one example of a reward accrual program. Another example of a reward accrual program is the annual cash rebate reward offered by the issuer of the Discover card. The issuer of the Discover card offers an annual cash rebate based upon a card holder's annual charge volume. The issuer analyzes card holders' annual charges and rewards card holders up to 1 percent cash back for qualifying transactions completed using the Discover card.
Another example of a reward accrual program is the General Motors ("GM") MasterCard automobile rebate program offered through Household Bank. Household Bank awards GM MasterCard card holders rebate dollars which can be redeemed upon a purchase of a GM brand automobile. Like the Discover card program, GM MasterCard card holders accrue dollars based on transactions completed using the GM MasterCard card.
Through programs such as the Discover and Citibank reward accrual programs, card holders are rewarded for account usage based on predetermined objective criteria. These programs have several significant shortcomings. A first shortcoming is the absence of a definite periodic performance target. Because a card holder is rewarded for virtually any account usage, the card holder is not necessarily encouraged to increase his account usage. A card holder continues to earn rewards even if his charge volume during a particular period drops significantly compared to a previous period.
Another shortcoming of accrual reward programs is that they fail to recognize the concept that every card holder will likely be most incented by a different reward. In the above described programs, the same type of rewards and the same level of rewards apply to an entire group of card holders. This one-size-fits-many approach fails to motivate those card holders who are more interested in other types of reward offers.
Yet another shortcoming of accrual reward programs is that they encourage the same type of activity for every card holder without regard to the individual profile of the card holder. By failing to analyze the profile of each card holder, the issuer could be increasing the risk of default on marginal quality accounts by incenting increased card usage. For example, in a program which encourages revolving charges, card holders with below average credit credentials may be encouraged to over-extend themselves. In such a circumstance, a card holder is actually encouraged to behave in a manner that is detrimental to the credit card issuer.
Tiered reward programs promote usage of a credit card account by rewarding a card holder for account usage at certain predefined levels. Like other reward programs, account usage is usually measured as a function of either total charge volume or total revolving credit, but tiered reward programs distribute rewards only to those card holders performing above certain performance levels. In many tiered reward programs, several performance levels are established by the issuer with each performance level having an associated reward.
The "Chase Retail Rewards Program" is an example of a tiered reward program. In this program, a card holder can earn a lower interest rate by carrying a higher balance. Chase has defined several tiers of rewards based on an average account balance. Each successive tier has a lower interest rate associated with it. For example, a card holder maintaining a balance above $1,000 is charged 5 percent above the prime interest rate, while a card holder maintaining a balance above $2,000 is charged 4 percent above the prime interest rate.
A system and method for administering a tiered reward program is disclosed in U.S. Pat. No. 5,025,372 by Burton et al. The '372 patent describes a system for processing and distributing rewards based on a participant's achieving a predefined level of performance. The predefined performance levels are selected by a sponsoring company, and the rewards are limited to credits to the card holder's account. The invention disclosed by the '372 patent is constrained by the same shortcomings as other conventional tiered reward programs.
Although tiered reward programs encourage a card holder to perform at a higher level, there are significant shortcomings associated with these types of methods. A first shortcoming is that the rewards are predefined for the entire population of participating card holders. A card holder who is not interested in the offered rewards will not be motivated to perform at a higher level. These programs are not customized to the preferences of the individual card holders.
Another shortcoming of tiered reward programs is that, like the reward accrual programs previously discussed, they encourage the same type of activity for every card holder without regard to the individual profile of the card holder. There is presently no tiered reward program which can set individualized performance targets for each card holder based on the card holder's transaction history and preferences.
Recently, some credit card issuers have implemented specialty programs which are tailored to a particular group of card holders. GE Capital, for example, has introduced the "GE Capital Gains Card" which is a travel and entertainment card that rewards card holders for saving rather than spending money. GE offers a card holder bonus points redeemable for airline tickets or gifts if the card holder conforms to behaviors identified by the card holder's company. For example, if a card holder conforms to a corporate travel policy by flying with a preferred carrier or staying at a preferred hotel, the card holder will be awarded points. Such specialty cards have similar shortcomings to the accrual and tiered reward programs described above.
Accordingly, the shortcomings associated with the related art have heretofore not been adequately addressed. The present invention addresses such problems by providing a system and processing approach that have not previously been proposed.